The fallout from the demise of debt-ridden US
domestic carrier Horizon Lines comes under the microscope of Alphaliner this
week, along with the restrictions of a 1920 US law that was designed to protect
the US maritime industry, but seems to have had a big hand in its fate.
The analyst said that Horizon’s exit will leave six
carriers operating liner trades under the US Jones Act – a law requiring that
all goods transported by water between US ports are carried on US-built and
flagged ships crewed by US citizens.
Horizon Lines announced at the end of last week
that subject to regulatory approval it intends to sell its business to rival
Matson, including its Alaska operations, and its Hawaii service to the Pasha
Group – a California-based transport and logistics company that currently
operates a ro/ro service to Hawaii.
The Alaska deal will see three 1987-built, 1660teu
vessels transferred to Matson, which the company is to retrofit with scrubbers
to comply with forthcoming low-sulphur regulations.
Pasha will acquire four vessels in the
2,400-2,600teu range, which entered service from 1979 to 1981.
Separately, Horizon announced that it will close its
loss-making Puerto Rico service by the end of December – thereby bringing to a
close a 56-year chapter in the history of the company that was originally the
domestic shipping arm of container transportation pioneer SeaLand.
Horizon’s Puerto Rico operation never recovered
from the $15m price-fixing fine handed down from the US Department of Justice
in 2011, and later in the same year it was forced to refinance to avoid
bankruptcy.
Its departure from the trade will leave four Jones
Act carriers providing connections between San Juan and the US Gulf and east
coast, and this will no doubt assist to firm up rates on the route.
Moreover, Alphaliner said that two of these
carriers, Tote-subsidiary Sea Star Line and Crowley, will receive purpose-built
LNG-powered containerships within the next two years to be deployed on the
Puerto Rico trade, mitigating the cost impact of the low-sulphur fuel ECAs
coming into force from January next year.
Horizon Lines – the largest Jones Act containership
operator – has a fleet of ancient fuel-guzzling ships and was unable to afford
to upgrade its vessels due to the Jones Act restrictions prohibiting
construction in overseas yards.
For example: a pair of 3,600teu ships ordered by
Matson from the Aker Philadelphia Shipyard are reported to be costing the
carrier $210m a unit – more than double the price that could be enjoyed from
Asian yards.
Indeed, Horizon has just sold the oldest container
ship in the world for scrap. At 46-years-old the 1,442teu Horizon Discovery is
at least twice the current average age for container ship scrapping – many boxships below 20-years are being
despatched to breakers yards as they are no longer economically competitive.
Meanwhile, calls continue for the Jones Act –
designed to protect the US maritime industry from competition – to be relaxed
on the basis that the 1920 legislation actually harms business and the US
economy.
In fact a 2013 report by the World Economic Forum
described the Jones Act as “the most restrictive of global cabotage laws and an
anomaly in an otherwise open market like the United States”.
Source: the loadstar. 18 November 2014
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